Octopus Energy is the UK’s second-largest household gas and electricity supplier, but founder Greg Jackson likes to say the business is really a “demo client” to showcase Kraken, the group’s software platform.
Kraken was first developed for use within Octopus, which now licenses the technology to other energy groups internationally, helping them manage customer billing and run solar panels, electric car chargers and heat pumps.
The platform is emerging from the shadow of its parent, and has already amassed more than 60mn accounts, including in Australia and Japan. Jackson now says the goal of 100mn accounts in 2027 risks being “embarrassingly unambitious”.
“There are tens of millions more in the immediate pipeline,” Jackson, who founded London-based Octopus in 2015, told the Financial Times. “It looks very healthy.”
Kraken is part of a race to enable and profit from the shift towards renewable electricity and the greater market complexity that it creates for energy suppliers and households.
Wholesale electricity prices are set to be far more volatile due to surges and lulls in supply depending on the weather, while centrally located gas and coal power plants are being replaced by wind turbines, solar panels and batteries dotted between far-flung locations and households.
Platforms such as Kraken crunch data to help utilities manage that complexity, for example by developing tariffs that enable households to run their solar panels, electric car chargers and heat pumps based on when they can get the best prices.
Its rivals are also attracting investors, with Ovo Energy’s Kaluza software platform getting A$150mn (US$94mn) from Australian utility AGL in June. Centrica bought Nottingham-based Ensek the following month.
“We’re seeing significant interest in the platform in Japan, and the US is also starting to build,” said Melissa Gander, Kaluza’s chief executive. “As a lot of energy businesses realise, the technology that served them over the last 20 years isn’t going to be the technology that serves them going forward.”
Kraken grew to have almost 22mn accounts — more than half of them for third parties — live on its platform by the end of the financial year to April 2023. It reported pre-tax profits of £20.8mn, equivalent to almost a tenth of the parent company’s earnings over the same period.
Kraken’s growth prospects — some investors say it has a potential market of more than 1bn accounts — have helped Octopus attract prominent climate-friendly funds, pushing its valuation to $9bn in 2024.
Al Gore’s Generation Investment Management and the Canada Pension Plan Investment Board increased their stakes in 2024, propelling Octopus to a higher valuation than London-listed rival Centrica, which owns British Gas. Galvanize Climate Solutions, co-chaired by former US climate envoy John Kerry, invested in June.
“Octopus has managed to position itself as a high-trust brand and disrupter — but of sufficient scale that customers aren’t taking start-up risk,” said Veery Maxwell, co-head of innovation and expansion at Galvanize. “Kraken is the software platform that underpins that offering.”
Kraken’s energy supplier customers include Origin Energy in Australia and Tokyo Gas in Japan, which are also shareholders in Octopus. Clients in the UK, where it has 50 per cent of the household energy market, include EDF and Eon. It is also targeting water utilities and electricity networks.
Privately held Octopus has also become increasingly vocal in UK policy debates, lobbying politicians to split the electricity market into different pricing zones, which it says will make the system more efficient and cheaper to run.
Kraken, which specialises in managing complex electricity pricing, has also helped develop a scheme in which UK households can receive payments to cut their electricity usage in order to balance supply and demand when needed.
“You need technology that is nimble and data-rich and knows that, tomorrow at 4pm, we should encourage people to turn on their dishwashers,” said Amir Orad, Kraken’s chief executive.
Kraken crunches “five billion data points a day” and is updated “hundreds of times a day”, Orad said, a far cry from the cumbersome legacy operating systems used by most utilities. “This is a living, breathing thing,” he added.
But there are still potential barriers to winning more business as some utilities, which are heavily regulated, are reluctant to take on the risk involved with adopting new platforms.
“Utilities need to be willing to take on the technical and project risk of moving on to a new operating platform in the middle of a very complicated energy transition,” said Tom Allen, analyst at UBS in Melbourne. But Kraken’s success was shown by “the quality of utilities” that had adopted its technology, he added.
Jackson said Kraken’s integrated system also helped to cut the cost of serving customers. The company told investors earlier in 2024 that Octopus’s cost to serve is almost 40 per lower than that of its UK competitors.
“As you move from a Jenga stack to a slick operating system, that reduces cost and overhead,” he said.
EDF, a Big Six energy provider in the UK, said using the platform had helped improve its score on the Trustpilot customer review platform. Plenitude, part of Italian energy major Eni, has also reported “promising results” since moving some of its customer accounts to the platform.
Australia’s Origin Energy, which announced its partnership with Kraken in May 2020 and moved its electricity and gas customers to the platform by May 2023, reported a fall in the cost of servicing its customers between 2020 and 2022. But they rose by A$214mn in the year to June 2024.
The energy retailer, which owns 23 per cent of Octopus and serves about 4mn electricity and gas accounts, blamed cost of living pressures, regulatory changes and a “delay in reaching full system functionality in Kraken”. Origin said the delay was due to regulatory changes rather than issues with the platform.
Eon, one of Kraken’s biggest clients in the UK, declined to comment on the impact on its own cost of serving customers, though it said the relationship with Kraken was “happy, strong and productive”.
Kraken’s efforts at building a separate identity from its parent have also included recruiting former BT chief executive Gavin Patterson as chair, a move that prompted speculation that Octopus would spin out the company.
Jackson stressed that Kraken benefits from the “huge amount of innovation that Octopus drives”. But he said the technology business was already operationally independent, adding that “in terms of future plans, I think we are always very open-minded”.
